The newly-announced joint venture between Wachovia’s retail brokerage and Prudential Securities isn’t scheduled to close for another 18 months. But the new company should be able to measure the effectiveness of its broker-retention strategy sooner than that.
The new Wachovia Securities, the fourth-largest firm in terms of number of reps, is offering retention packages starting at 10 percent (for those producing $300,000 in the trailing 12 months) scaling up to 30 percent (for those who produce $1.2 million or more.) Producers with an outstanding forgivable loan will see that "note" reduced by the amount of retention bonus they’re offered, according to sources at Wachovia.
A Wachovia spokesman asked to comment on retention packages would say only that the firm would be offering them, and that Prudential and Wachovia producers would be offered the same packages.
Often, experts say, post-merger trial balloons are floated to see how the largest producers react. Should the cream of the crop stage a protest, the packages could be sweetened, because top producers are the most valuable of assets.
A certain amount of attrition is expected no matter what the retention packages, but the real personnel movement is not expected until details of the retention packages are finalized. "Some people who are contemplating a move ahead of this have given us an indication that they’ll sit tight until they see what the deal is going to be," says one regional exec.
Some felt that consolidation in the brokerage industry had undermined the power individual brokers used to wield in the job market. "It makes the broker much more commoditized," says one recruiter. The runoff of large producers could be a great benefit to regional firms. "CEOs there are saying they’re seeing talent they’ve never seen before," the recruiter adds.
A payout grid for the new company will emerge later rather than sooner—probably around the time of the formal close of the transaction in late 2004. As for products, the firm plans to use Prudential platforms for separate account and mutual fund managed money products.
Back-office conversions are expected to happen slowly and deliberately as part of an effort to avoid disruptions that would put off customers. The new company expects to save $220 million per year by combining operations. Part of those savings will come from closing and regrouping offices into complexes. The company expects eventually to reduce its branch network by 17 percent.
The combined firm will have $537 billion in client assets and boast a sales force of approximately 12,000.
It also will offer advisors a measure of flexibility: They have a number of brokerage subdivisions to choose from within the new company: Wachovia bank, its standard brokerage, an independent services division and Profit Formula, a quasi-independent arm. Each has its advantages, and brokers can choose based on which fits their needs best.
